When most investors think of real estate, they think of single-family homes or some type of commercial building. Some might think of land or self-storage facilities. But few people consider hotel real estate a viable form of real estate investment.
EquityRoots is a crowdfunding company looking to change that perception. By lowering the barriers to entry, EquityRoots enables ordinary people to invest in hotel property. What you should know about the company.
- Invest in hotel buildings or renovations
- No annual management fees for investors
- Some investment options for non-accredited investors
- High investment minimum
Open to non-accredited investors
What is EquityRoots?
EquityRoots is a crowdfunding marketplace focused on democratizing hotel ownership. The platform was founded in February 2014, a few years after the JOBS Act opened crowdfunding opportunities for everyday investors. Because hotels are large buildings, they typically require large amounts of financial capital to build or remodel.
Sometimes these loans are hard to find at banks. This allows hoteliers to seek private funding from wealthy investors or private REITs. EquityRoots wants to change that. EquityRoots believes it can lower the cost of borrowing for hoteliers and create great investment opportunities for individuals by allowing investors to pool smaller amounts of money.
EquityRoots focuses on a narrow niche of investment opportunities. All investment opportunities include opportunities from brand hotels such as Holiday Inn or IHG. Some investments include loans to franchise owners who want to build or renovate. Other options include purchasing equity in a specific franchise location or property.
What does it offer?
EquityRoots makes it easy for investors to extend loans or buy stakes in branded hotel projects. Because EquityRoots focuses on the hotel niche, it advertises few investment opportunities at any one time.
However, EquityRoots offers a ton of information on each opportunity to help investors feel better equipped to make their investment decisions.
Choose how your money will be invested
Investors can examine individual hotel projects and invest in them. EquityRoots shares the overall business plan, expected internal rate of return, and expected holding period for the project. Investors can do a thorough research of EquityRoots before investing money in a project.
Highly illiquid investments
Investing in EquityRoots does not have a well-advertised secondary market. Depending on the terms set out in the Private Placement Memorandum of each transaction, investors may be able to sell Shares to another person or participate in some form of repurchase.
However, most stock investors will only get a return on their money after a sale. Currently, the three deals listed on EquityRoots’ website have hold periods of 28 months, 5 years and 10 years.
Loan investors should expect cash flow from their investments. However, they may not be able to “pay off” their portion of the loan early.
$ 15,000 minimum investment
EquityRoots advertises minimum investment amounts between $ 15,000 and $ 25,000. Given the high minimum investments, it can be difficult for investors to hold a well-diversified portfolio of hotel projects.
No fees for investors
Investors do not pay any fees to EquityRoots. Instead, hotel owners seeking funding usually pay the issuing and other fees for the loan or equity projects. Every deal at EquityRoots is structured differently, so investors need to read the Private Placement Memorandum (PPM) before investing in anything.
Investments qualify for 1031 treatment
EquityRoots supports 1031 real estate exchanges for landlords looking to reinvest funds from a property sale without incurring capital gains taxes. Their team can help you determine if your investment in any of their offerings would meet the “same taxpayer requirement” to take advantage of this tax benefit.
Are there any fees?
EquityRoots does not charge any fees to its investors. Hotel owners looking to raise capital pay the fees associated with business loans or capital projects.
How do I contact EquityRoots?
Illinois-headquartered investors can email the EquityRoots HQ location:
3 Dani Ln
Schaumburg, IL 60173
Investors who would like to get in contact with the EquityRoots team can also contact us in various ways. The company’s “Our Team” page displays the email addresses of the entire executive team. For general inquiries or assistance, investors can email [email protected]
You can also call the company’s customer service team at 312-483-2200.
How does EquityRoots compare?
EquityRoots operates in a narrow niche (hotel loan and equity finance). This narrow focus gives EquityRoots an edge in evaluating specific investment opportunities to display on the website.
Since hotel finance is a relatively unknown marketplace, EquityRoots has a “first-to-market” advantage. And it does a great job showing investors how to think about hotel investments. Because of this, EquityRoots fares well against other crowdfunding property sites.
However, EquityRoots has one disadvantage compared to the competition. Because of its narrow focus, it has a poor deal flow compared to other crowdfunding sites. Most crowdfunding real estate sites offer more investment opportunities. If you want more deal volume or better variety of offers, check out this quick comparison chart:
How do I open an account?
Investors can register in a matter of minutes to open an account. When you open an account, you can browse offers according to your registered status. Before investors can fund a transaction, the investor must go through an initial screening process to ensure that they have confirmed the appropriate registration status.
After investors have a verified account, they can start funding deals. Before financing, investors receive a PPM that describes the specific risks of each deal. They also have to sign several documents. Once these are signed, the investor can fund a deal with ACH transfers. The fund’s money goes into a secured escrow account until the deal is closed.
Is it safe and secure?
EquityRoots creates a unique LLC for each deal it supports. This legally separates each deal from the overall performance of EquityRoots and the other deals on their website. Each LLC uses escrow accounts to hold the money until a business is funded and money is released for the investment project. These precautions can protect investors and borrowers who use the EquityRoots site.
Despite the precautionary measures, EquityRoots cannot guarantee the performance of an investment opportunity. Investors can lose money.
In addition, like all companies, the company stores personal data on its servers. This means that in the event of a security breach, your data could be stolen by hackers.
Is it worth it?
The deals listed have excellent return targets and thorough business plans that investors seeking hotel exposure can trust. The real problem seems to be in the limited number of options on the website.
At the time of this writing, only 3 potential deals were listed. One was already fully funded and the other two were marked “Coming Soon”. That means there are currently no deals to invest in.
If you combine the low availability of deals with the five-digit investment minimum, most investors will be over-focused on some deals. This can lead to underperformance if one of the deals comes to nothing.
Given the limited number of active deals on the site, it’s hard to recommend EquityRoots as a great investment platform. However, as the platform continues to grow and mature, it may be worth thinking about in the future. In the meantime, you might want to browse our list of the best real estate crowdfunding sites to find a better option for today.
Open to non-accredited investors
Hotel construction and real estate investments
High – Basic financial information is provided in advance and investors receive ongoing quarterly interest rate declarations, regular updates from hotel operators and annual K1’s.
Varies – current offers offer terms of 28 months, 5 years and 10 years
Customer service phone number
Customer service email address